Meaning of Production
Production is an activity of utter importance for any economy. In fact, a nation with a high level of productive activities spearheads the prosperity charts. This is because raw goods, surely are valuable, but production done upon these raw goods adds up to their value or their want-satisfying power.
Production is not only concerned with the tangible aspect. Rather production also includes any service that can satisfy the wants of people. Hence now you know why the service of transportation is a process of production too. Notice how this service is intangible.
In light of the above-mentioned facts, we can conclude that production is the process of working upon the resources of nature and pushing or creating their utilities in order to satisfy the wants of consumers. However, the term production in Economics is more than what meets the eyes.
It is important to note that production cannot account for the creation of the seed, but it accounts for the transformation of the seed into a tree, the sale of the fruits grown on that tree and so on. In other words, production is not the creation of matter, which is also out of the realms of human power
Production through a Wider Perspective
Note that the meaning of production doesn’t always involve physical inputs and physical outputs, as already discussed. There are various services of doctors, lawyers musicians, etc. that deal with intangible inputs and outputs
Processes in Production
Utility of Form
The manufacturing processes that take physical inputs and produce physical outputs, eventually increasing the utility of the resource being manufactures, are integral branches in the production tree. These processes are the most obvious forms of production. They change the form of the goods under concern, in order to satisfy a greater human want.
Utility of Time
Lastly, storage and manipulating availability drastically change the utility of products. For example, seasonal fruits are canned and various preservation techniques are used for their storage so that they can be sold for higher prices during off-seasons.
Utility of Place
- Transportation service from a place where the resource gives little satisfaction to a place where it provides a lot of satisfaction also adds up to the utilit
- This includes the extraction of natural resources from earth e.g. mining of ores, gold, coal, metal ores, etc. These are further transported to markets where they can be sold.
Suppose you’re a producer of a commodity of your choice. Probably, thoughts about profit might’ve struck your mind upon reading the previous line. Technically, a producer generally reaches profit through production optimisation. Isoquants and iso_cost lines specify the production optimisation point.
Isocosts and Isoquants can together help us to determine the optimum production for a firm. We can achieve production optimisation in two ways. Either we can maximize the production for a given outlay or we can minimize the cost of producing a given level of output.
In case a firm has decided to achieve a given level of production, the next step would be to choose the combination of factors to achieve this target. Definitely, a rational firm would choose the least cost combination. This least cost combination is found out by superimposing the iso-quant on the iso-cost line.